Tying the Financial Knot

You and your future spouse are not only romantic partners—you’re financial partners, too. That partnership might start with a joint checking account or by adding your new spouse to your employer’s health plan. But there are other steps you may want to consider as you seek to strengthen your partnership and ensure that you prosper together.

How far will you go in merging your finances? Should you have a joint checking account, separate accounts or both? Who will pay the bills? If you’re both working, whose employer-provided health plan should you use? Perhaps most important, when it comes to spending and taking on debt, do you have similar attitudes—and, if not, what’s a sensible compromise?

Many couples come to a marriage with strong ideas about money—and possibly substantial assets, especially if they are marrying later in life. According to the U.S. Census Bureau, the median age for first marriages in 2010 was 28.2 years old for men and 26.1 for women. By contrast, in 1980, the median age was 24.7 years old for men and 22 for women.

As if the challenges of a new marriage weren’t enough—sharing closet space, getting used to food preferences, deciding which parents to visit during the holidays—finances add a whole new set of issues.

But whatever your age on your wedding day, several questions need to be addressed and financial issues that come with marriage need to be tackled. Here are some steps you may want to take:

Disclose all. To get off on the right foot, you should probably each disclose everything about your finances, including portfolio balances and debts. For example, if one or both of you has a lot of debt, tell your partner how much it is and how you plan to pay it off or reduce it to a manageable level. If there is a substantial difference in your net worth or this is a second marriage for one or both of you, you may want to consider a prenuptial agreement.

Decide who pays the bills. To cover the utilities, rent or mortgage, groceries, and other shared expenses, you might set up a joint checking account. But each of you may also want your own bank account and credit cards that you can use for your own spending. But be careful about applying for too many credit cards: Depending on how you manage your debt, that could hurt your credit score.

Save on benefits. If you’re both working, you may be able to save money by eliminating any duplication of health care benefits. Just figure out who has the best coverage for the cost involved.

Change beneficiary designations. While you’re dealing with employee benefits, consider whether you ought to change the beneficiaries listed on your company-paid life insurance and on your employer’s retirement plan, as well as on any individual retirement accounts and any individual life insurance policies. Remember, these beneficiary designations—and not your will—typically determine who inherits these types of assets. Also, if either of you has a new name, you’ll need to change employee records and contact investment and mutual fund companies, banks and Social Security. Don’t forget to change the name on your driver’s license, passport and credit cards, too.

Rethink your life insurance. You may need insurance beyond what your employer provides—especially if one spouse is coming to the marriage with dependents, you intend to have children quickly, or you plan to take out a mortgage to buy a home together.

Write wills. If this is a first marriage and you have relatively modest assets, simple wills may suffice. If you have greater assets or there are children from earlier marriages, you may need to engage in more sophisticated estate planning.

Watch the tax bill. If you both work, you could be unpleasantly surprised to find that your income-tax bill may be higher as a married couple than if you had stayed single, particularly if you have above-average incomes. The good news is that the standard deduction for married couples has been set at twice the amount for single taxpayers, and the 15% tax rate for married couples covers double the income of single filers. But these provisions are in place only through 2012 and may not be renewed. If you think you might pay more in taxes as a married couple, consider increasing your payroll withholding.

As if the challenges of a new marriage weren’t enough—sharing closet space, getting used to food preferences, deciding which parents to visit during the holidays—finances add a whole new set of issues. But addressing the important financial questions and issues that come with marriage, and continuing the conversations with your spouse even after the wedding, could help keep the financial knot tied tightly.